Commissioner of the Australian Federal Police v Zhang
[2016] VSCA 171
•22 July 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2015 0083
| THE COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE | Applicant |
| v | |
| HENG JIE ZHANG and YING SHEN | First Respondent Second Respondent |
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| JUDGES: | TATE, PRIEST and BEACH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 21 June 2016 |
| DATE OF JUDGMENT: | 22 July 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 171 |
| JUDGMENT APPEALED FROM: | Commissioner of the Australian Federal Police v Zhang & Anor(Ruling No 1) [2015] VSC 390 (T Forrest J) |
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PROCEEDS OF CRIME – Applications for exclusion from restraining orders – Applications for forfeiture orders – Applications for exclusion from forfeiture orders – Whether judge erred in determining the forfeiture applications before determining the applications for exclusion from the restraining orders – Whether judge misapplied Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46 – Proceeds of Crime Act 2002 (Cth) ss 19, 29, 31, 45, 49, 66, 73, 74, 92, 315A and 317 – Leave to appeal granted and appeal allowed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr A R Moses SC with Ms R Burton | Australian Federal Police |
| For the Respondents | Mr O P Holdenson QC with Mr C G Juebner | Tony Hargreaves & Partners |
TATE JA
PRIEST JA
BEACH JA:
TABLE OF CONTENTS
Introduction and summary ................................................................................................. 1 Proceedings for confiscation of proceeds of crime ……………………………………... 3 Statutory scheme ……………...…………………………………………………………... 11 The judge’s reasons (Ruling No 1) ….................................................................................. 22 The parties’ submissions …................................................................................................. 27 Did the judge misconstrue the Act? ................................................................................... 29 Did the judge misapply Zhao? ........................................................................................... 35 Conclusion …………………………………………………………………………………. 38 - - -
Introduction and summary
An application for leave to appeal is brought from a judge of the Trial Division who had before him the following applications for hearing and determination:
(a) applications made by Heng Jie Zhang (‘Zhang’) and Ying Shen (‘Shen’) under s 31(1) of the Proceeds of Crime Act 2002 (Cth) (‘the Act’)[1] to exclude property from restraining orders that had previously been made pursuant to s 19 of the Act (‘the s 31 exclusion applications’) — these are determined under s 29;
(b) applications made by the Commissioner of the Australian Federal Police (‘the Commissioner’) under s 59(1) of the Act for forfeiture orders (‘the forfeiture applications’) — these are determined under s 49;
(c) applications made by Zhang and Shen under s 74(1) of the Act to exclude property from forfeiture orders (‘the s 74 exclusion applications’) — these are determined under s 73.[2]
[1]The statutory scheme is set out in detail at [34]–[52] below.
[2]There were also applications made by Zhang and Shen for compensation under s 78(1) of the Act but, as the judge noted, those applications may for present purposes be ignored.
The Commissioner had submitted that all the applications should be heard together; he contended that all the affidavit evidence that had been filed by the parties pursuant to Court orders should be adduced because the affidavits did not differentiate between the various applications (the s 31 exclusion applications, the forfeiture applications, or the s 74 exclusion applications). The Commissioner urged that once all of the evidence was ‘on the table’, the judge should then determine the s 31 exclusion applications, followed by the forfeiture applications, followed by the s 74 exclusion applications. Relevantly, the Commissioner submitted that the s 31 applications seeking to exclude property from the restraining orders ought be determined first before the forfeiture applications were heard and determined.
The judge rejected the Commissioner’s submissions and ordered that the forfeiture applications should be heard and determined before the hearing and determination of either the s 31 exclusion applications or the s 74 exclusion applications. The consequence of the sequence adopted by the judge was that as he ultimately determined that the forfeiture application was unsuccessful, there was no need for him to go on to determine the exclusion applications at all, and no need to consider the supporting evidence relied upon by Zhang and Shen. In particular, there was no need for him to hear and determine the exclusion applications under s 31 from the s 19 restraining orders.
The application for leave to appeal, which was heard at the same time as the appeal, raises important issues concerning the construction of the Act and whether the judge erred in ordering that the forfeiture applications should be heard separately and determined before the hearing and determination of the s 31 exclusion applications.
For the reasons below, we would grant leave to appeal and allow the appeal.[3] We consider that the judge erred in hearing and determining the forfeiture applications before determining whether specified interests in the property restrained should be excluded from the restraining orders. That is, we consider that the proper sequence that the judge should have adopted was for the s 31 exclusion applications to be determined first (under s 29 of the Act), before the Commissioner’s application for forfeiture of the restrained property was heard and determined.
[3]Hereafter referred to as ‘the appeal’.
Proceedings for confiscation of proceeds of crime
Neither Zhang nor Shen has been charged with or convicted of any criminal offence.
Zhang and Shen are husband and wife respectively. They live together in China.
Zhang is the registered proprietor of the property the subject of the restraining orders and the forfeiture applications. The restraining orders restrain the following property: two residential properties (‘the Canterbury property’ and ‘the Ashwood property’) and a Mercedes-Benz motor car (‘the Mercedes’), collectively ‘the restrained property’. Shen had been the requesting party for an international funds transfer in 2012 of $2,081,325 into an account held in the name of ‘Heng Jie Investments’, from which funds were drawn for the purchase of the Canterbury property.[4]
[4]See [25] below.
There were three applications made by the Commissioner (pursuant to s 25) for restraining orders under s 19 of the Act:
·first, an application dated 13 May 2013, relating to the Canterbury property;
·secondly, an application dated 30 May 2013, relating to the Mercedes; and
·thirdly, an application dated 27 June 2013, relating to the Ashwood property.
Those applications resulted in the following restraining orders being made under s 19:
·an order relating to the Canterbury property, dated 14 May 2013, made ex parte by Hargrave J;
·an order relating to the Mercedes, dated 31 May 2013, made ex parte by Hargrave J; and
·an order relating to the Ashwood property, dated 28 June 2013, made ex parte by Ginnane J.
The application for a s 19 restraining order with respect to the Canterbury property was made in reliance upon an affidavit, sworn 13 May 2013, by Amanda Glover, a member of the Australian Federal Police with the rank of Detective Senior Constable. Exhibited to the 13 May 2013 affidavit were a series of exhibits, including Australian Tax Office profile reports and reports from the Australian Transaction Reports and Analysis Centre (AUSTRAC). The application for a s 19 restraining order with respect to the Mercedes was supported by an affidavit of Amanda Glover sworn 29 May 2013. The application for a s 19 restraining order in respect of the Ashwood property was supported by an affidavit sworn on 28 June 2013 by Wendy Rix who held the rank of Senior Constable stationed at Melbourne within the Criminal Asset Confiscation Taskforce.
On 28 May 2013, within the required 28 day period from the date the restraining order was obtained,[5] the Commissioner applied for a forfeiture order under s 59 in respect of the Canterbury property. On 6 June 2013 the Commissioner applied for a forfeiture order of the Mercedes. On 5 July 2013 the Commissioner applied for a forfeiture order with respect to the Ashwood property. [6]
[5]See s 45(2). See [39] below.
[6]In addition to the affidavits the Commissioner had already filed, he filed an additional affidavit in reply by Amanda Glover sworn 5 June 2015.
On 3 October 2013 Zhang made application under s 31 of the Act for exclusion of his interests in the restrained property in the following terms:
Heng Jie Zhang (Applicant) MAKES APPLICATION under s 31 of the Proceeds of Crime Act 2002 for an exclusion order in respect of the following property which is the subject of restraining orders made in this proceeding, namely:
a. the property situated at 10 Monomeath Avenue, Canterbury, Victoria and more particularly described in Victorian Certificate of Title Vol 09089 Fol 020;
b. the property situated at 11 Teck Street, Ashwood, Victoria and more particularly described in Victorian Certificate of Title Vol 11299 Fol 120; and
c. the 2009 Mercedes Benz ML350, VIN WDC1641862A531718, with Victorian registration number JIE666.
On the same day, Shen made her application under s 31 for an exclusion order in respect of the restrained property in the same terms. Zhang and Shen also made their s 74 exclusion applications on 3 October 2013.
In response to orders made by the Court, Zhang and Shen supported their s 31 and s 74 exclusion applications by filing and serving the following affidavits:
Deponent
Date made
Guo Zhimin
1 November 2013
Zhang
8 April 2014
Tianyue Rebecca Sun (interpreter
for Guo)
17 July 2014
Pei Liang Zhang
17 July 2014
Feng Yi
15 February 2015
Quing Wu (interpreter for Yi)
15 February 2015
Shen
15 February 2015
Quing Wu (interpreter for Shen)
15 February 2015
Richard Baylis
2 July 2015
Changrong Zhu
3 July 2015
Zhang
Served unsworn 3 July 2015[7]
[7]This was to be sworn by Zhang when he arrived in Australia. There was no suggestion this was not done.
Zhang and Shen each asserted a beneficial interest in the restrained property and acknowledged each other’s beneficial interest. They regarded the restrained property as belonging to both of them, being property of their marriage. The evidence relied upon by Zhang and Shen was aimed at establishing that they had sufficient funds with which to acquire the restrained property. In particular, the evidence sought to demonstrate that Zhang had lawfully earned all but $2 million which was used to acquire the restrained property, the remaining $2 million being borrowed by Zhang from Guo shortly prior to settlement of the Canterbury property. The earnings were alleged to come from three sources in China, namely:
·Dividends paid to Zhang from his wine distribution company, Wuxi Hengjie Wine;
·Dividends paid to Zhang by Wuxi Wu; and
·Zhang’s share trading activities.
Zhang deposed to the following accumulation of funds:
Calendar
year
Pre-tax
earnings
($AUD)
After-tax earnings
($AUD)
Other money inflows ($AUD) Purchase of
restrained assets
($AUD)
Cumulative
amount
available
($AUD)
2002
3,600
2,880
2,880
2003
9,000
7,200
10,080
2004
13,000
10,400
20,480
2005
41,000
32,800
53,280
2006
61,000
48,800
102,080
2007
259,000
207,200
309,280
2008
749,000
599,200
908,480
2009
667,000
533,600
110,000
(Mercedes)
1,332,080
2010
915,000
732,000
600,000
(Ashwood
property)
1,464,080
2011
2,594,000
2,423,200
3,887,280
2012
707,000
565,600
2,000,000
5,000,000
(Canterbury
property)
1,452,880
It was also alleged by Zhang that the evidence established the flow of funds from China into the purchase of the restrained property.
There was no challenge to the bona fides of either the s 31 or s 74 exclusion applications.
The judge delivered a ruling on 4 August 2015 (‘Ruling No 1’)[8] in which he held that the fairest way to conduct the proceedings was to hear and determine the forfeiture applications first, followed, if necessary, by the s 31 and s 74 exclusion applications. This is the ruling under appeal.[9]
[8]Commissioner of the Australian Federal Police v Zhang [No 1] (2015) 298 FLR 128.
[9]However, the Commissioner seeks an order that if the appeal is allowed, Ruling No 2 and Ruling No 3 should also be set aside.
On 6 August 2015, he gave a further ruling refusing to allow the Commissioner to rely on opinion evidence contained in the affidavit of Amanda Glover sworn 13 May 2013[10] (‘Ruling No 2’).[11]
[10]See [11] above.
[11]Commissioner of the Australian Federal Police v Zhang [No 2] [2015] VSC 437.
After the hearing of the forfeiture applications conducted by the Commissioner on the basis of the admissible portions of the affidavits and exhibits to those affidavits, during which there was no cross-examination of any of the deponents and no witness gave viva voce evidence, the judge acceded to a no case submission brought by Zhang and Shen and refused the forfeiture applications (‘Ruling No 3’).[12]
[12]Commissioner of the Australian Federal Police v Zhang [No 3] [2015] VSC 438.
The judge made orders giving effect to his rulings on 7 August 2015.
He took the view that that the sum total of the evidence disclosed that:
·Heng Jie Zhang bought two properties and a motor vehicle in the period 2009 to 2012;
·The Ashwood property was purchased for $600,000 in 2012;
·The Canterbury property was purchased for $5 million in 2012; and
·The Mercedes-Benz motor vehicle was purchased for $110,000 in 2009.[13]
[13]Ibid [10].
The judge further found that the two properties and the Mercedes were unencumbered. In relation to identifying the source of the funds to purchase the Canterbury property, the judge concluded that the funds were provided by the ‘Heng Jie Investments’ account with the Commonwealth Bank. Monies held in that account had been transferred from a variety of sources in 2012, including $2,081,325 deposited by international funds transfer at the request of Shen, and $2 million deposited by Guo. There were other smaller deposits contributed by different persons. The judge also held that Zhang did not file tax returns in Australia between 1997 and 2013, and noted that the parties had agreed that Zhang had resided in China since 2005.[14]
[14]Ibid [11].
The judge described the Commissioner as having made ‘sensible concessions’[15] that the evidence he adduced did ‘not prove more than that funds were deposited into the Heng Jie Investments account from diverse persons and in a convoluted fashion’.[16] There was no evidence of the initial source of the monies, or any information about the circumstances of any of the depositors, or whether the monies were before tax or after tax dollars. The Commissioner conceded he was unable to point to specific underlying criminal conduct.
[15]Ibid [12].
[16]Ibid.
The result was, the judge concluded, that while the evidence might justify a suspicion under s 19 of the Act sufficient for the making of a restraining order, it was quite insufficient to justify a finding that any one of the four alternative limbs of s 49(1)(c) was satisfied, namely, that the restrained property was the proceeds of one or more indictable offences, or of one or more foreign indictable offences, or of one or more indictable offences of Commonwealth concern, or was an instrument of one or more serious offences.[17] He observed:
There is no evidence of the initial source of the monies deposited into the Heng Jie Investments CBA account. I know nothing of the circumstances of any of the depositors, or whether the monies deposited were before tax or after tax dollars. In short, it is my view that the totality of the evidence on this application [the forfeiture application] is incapable of satisfying s 49(1)(c) of the Act. Put another way, the Commissioner has failed to prove even to a prima facie level that the property is the proceeds of crime or an instrument thereof.[18]
[17]Section 49(1)(c) is set out below at [41].
[18]Ruling No 3 [2015] VSC 438 [13].
The judge therefore refused the applications for forfeiture. It followed that by operation of law the restraining orders ceased to operate: s 45(3).[19]
[19]Ibid. See [39] below.
The grounds of appeal challenge the sequence adopted by the judge as expressed in Ruling No 1 as being, in substance, inconsistent with the intended operation of the Act. The grounds of appeal are:
1.The primary judge erred in determining not to hear the applications for exclusion and forfeiture together.
2.The primary judge failed to properly construe the Act and in particular ss 49 and 73 of the Act.
3. The primary judge failed to consider the overarching purpose of litigation in determining not to hear the applications for exclusions and forfeiture together.
4.The primary judge erred in finding that not hearing all applications together is the fairest approach and there is no illogicality created by this approach.
5. The primary judge erred in applying Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46 [‘Zhao’].
6. The primary judge erred in relying on the non-application of s 49(3) of the Act as a reason for hearing the applications separately.
7.As a result of the primary judge’s ruling that the applications be heard separately, he proceeded on an erroneous basis in hearing and determining the forfeiture application in that he:
(a) split the hearing of the applications; and
(b) declined to hear all of the evidence filed in support of each of the applications before the Court.
8. As a result of the primary judge’s ruling that the applications be heard separately, the hearing of the forfeiture application miscarried and the proceedings require rehearing.
All of the grounds of appeal relate to Ruling No 1.
The Commissioner seeks the following orders:
1. Leave to appeal is granted.
2. Appeal is allowed.
3.Orders of the Court dated 7 August 2015 be set aside and the exclusion, compensation and forfeiture applications be remitted to the Supreme Court for rehearing, being the following:
(a)Application for exclusion order (s 31) Ying Shen dated 3 October 2013;
(b)Application for exclusion order (s 74) Ying Shen dated 3 October 2013;
(c)Application for compensation order (s 78) Ying Shen dated 3 October 2013;
(d)Application for exclusion order (s 31) Heng Jie Zhang dated 3 October 2013;
(e)Application for exclusion order (s 74) Heng Jie Zhang dated 3 October 2013;
(f)Application for compensation order (s 78) Heng Jie Zhang dated 3 October 2013;
(g)Application for a forfeiture order (Canterbury property) dated 28 May 2013;
(h)Application for a forfeiture order (Mercedes-Benz) dated 6 June 2013;
(i)Application for a forfeiture order (Ashwood property) dated 5 July 2013.[20]
[20]The Commissioner also seeks an order that Zhang and Shen pay the Commissioner’s costs, including reserved costs, of the hearing at first instance and of the appeal.
As many of the grounds of appeal overlap with each other, it is convenient to deal with the issues as they were argued on the appeal, namely, that the judge: (1) failed properly to construe the Act, and (2) erroneously applied Zhao.
Before examining the issues that arise on the appeal, it is necessary first to consider the details of the statutory scheme and its general application to the current proceedings.
Statutory scheme
Section 19(1) of the Act requires a court to make a restraining order if certain preconditions are met, namely, where there are reasonable grounds to suspect that the property is the proceeds of, or an instrument of, crime:
19Restraining orders — property suspected of being proceeds of indictable offences etc
When a restraining order must be made
(1) A court with proceeds jurisdiction must order that:
(a) property must not be disposed of or otherwise dealt with by any person; or
(b)property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order;
if:
(c) a proceeds of crime authority applies for the order; and
(d) there are reasonable grounds to suspect that the property is:
(i) the proceeds of a terrorism offence or any other indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern (whether or not the identity of the person who committed the offence is known); or
(ii) an instrument of a serious offence; and
(e) the application for the order is supported by an affidavit of an authorised officer stating that the authorised officer suspects that:
(i) in any case—the property is proceeds of the offence; or
(ii) if the offence to which the order relates is a serious offence—the property is an instrument of the offence;
and including the grounds on which the authorised officer holds the suspicion; and
(f) the court is satisfied that the authorised officer who made the affidavit holds the suspicion stated in the affidavit on reasonable grounds.
For present purposes, s 19(1) makes plain that the court must make a restraining order with respect to ‘property’[21] on the application of a ‘proceeds of crime authority’[22] if an ‘authorised officer’[23] has reasonable grounds to suspect that the property is the proceeds of an indictable offence or a serious offence,[24] and the court is satisfied that the authorised officer holds the suspicion on reasonable grounds.
[21]By s 338, property means real or personal property of every description, and includes ‘an interest’ in any such real or personal property’; and an interest in relation to property includes legal and equitable interests, and ‘a right, power or privilege in connection with the property or thing’.
[22]The Commissioner of the Australian Federal Police is, by virtue of s 338, a proceeds of crime authority.
[23]Pursuant to s 338, an authorised officer includes a member of the Australian Federal Police authorised by the Commissioner of the Australian Federal Police.
[24]For example, the applications for the restraining orders described the offences as follows:
(b) an authorised officer suspects on reasonable grounds that the property specified in the Schedule [to the application] is the proceeds of the following indictable and serious offences:
(i) dealing with money, reasonably suspected of being the proceeds of crime, valued at $100,000 or more, contrary to subsection 400.9(1) of the Criminal Code (Cth); and
(ii) conspiring with another person with the intention of dishonestly causing a loss to a Commonwealth entity, namely the Australian Taxation Office, contrary to subsection 135.5 of the Criminal Code (Cth).
By virtue of s 26(4), the court must consider an application for a restraining order under s 19 ‘without notice having been given’ if the Commissioner ‘requests the court to do so’.
In circumstances where a restraining order has been made under s 19, s 31 permits a person who claims an ‘interest’ in the property to apply for its exclusion from the restraining order under s 29. Section 29(1) permits the court to exclude a specified ‘interest’ in ‘property’ from the order. Section 29(2)(d) provides that a reason for excluding a specified interest in property from a restraining order under s 19 includes that the ‘interest’ is not the proceeds of an indictable offence. Section 29 relevantly provides:
29Excluding property from certain restraining orders
(1) The court to which an application for a restraining order under section 17, 18 or 19 was made must, when the order is made or at a later time, exclude a specified interest in property from the order if:
(a) an application is made under section 30 or 31; and
(b) the court is satisfied that the relevant reason under subsection (2) or (3) for excluding the interest from the order exists.
Note:Section 32 may prevent the court from hearing the application until the responsible authority has had a reasonable opportunity to conduct an examination of the applicant.
(2) The reasons for excluding a specified interest in property from a restraining order are:
(a)for a restraining order under section 17 if the offence, or any of the offences, to which the order relates is a serious offence—the interest is neither proceeds nor an instrument of unlawful activity; or
(b) for a restraining order under section 17 if paragraph (a) does not apply—the interest is neither proceeds nor an instrument of the offence, or any offence, to which the order relates; or
(c) for a restraining order under section 18—the interest is neither:
(i) in any case—proceeds of unlawful activity; nor
(ii) if an offence to which the order relates is a serious offence—an instrument of any serious offence; or
(d) for a restraining order under section 19—the interest is neither:
(i)in any case—proceeds of an indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern; nor
(ii) if an offence to which the order relates is a serious offence—an instrument of any serious offence.
Note:One of the circumstances in which property ceases to be proceeds of an offence or unlawful activity involves acquisition of the property by an innocent third party for sufficient consideration: see paragraph 330(4)(a).
Section 31(1) provides that a person ‘may apply for an order under section 29 … if a restraining order that covers property in which a person claims an interest has been made’. More generally, s 31 provides:
31 Application to exclude property from a restraining order after restraining order has been made
(1) A person may apply for an order under section 29 or 29A if a restraining order that covers property in which the person claims an interest has been made.
(1A) An application under subsection (1):
(a) must be made to the court that made the restraining order; and
(b) may be made at any time after the restraining order is made.
(2) However, unless the court gives leave, the person cannot apply if he or she:
(a) was notified of the application for the restraining order, but did not appear at the hearing of that application; or
(b) appeared at the hearing of that application.
(3) The court may give the person leave to apply if the court is satisfied that:
(a) if paragraph (2)(a) applies—the person had a good reason for not appearing; or
(b) if paragraph (2)(b) applies—the person now has evidence relevant to the person’s application that was not available to the person at the time of the hearing; or
(c) in either case—there are other special grounds for granting the leave.
(4) The person must give written notice to the responsible authority of both the application and the grounds on which the exclusion is sought.
(5) The responsible authority may appear and adduce evidence at the hearing of the application.
(6) The responsible authority must give the person notice of any grounds on which it proposes to contest the application. However, the authority need not do so until it has had a reasonable opportunity to conduct examinations in relation to the application.
Section 45(2) relevantly provides that ‘[a] restraining order ceases to be in force if, within 28 days after the order was made …. there is no confiscation order[25] or application for a confiscation order that relates to the offence’. Section 45(3)(a)(i) provides that a restraining order ceases to be in force in respect of property if the court refuses an application for forfeiture that would have covered the property:
[25]A ‘confiscation order’ is defined by s 338 to include a forfeiture order.
45 Cessation of certain restraining orders
…
(3) A restraining order ceases to be in force in respect of property covered by the restraining order if:
(a) either:
(i)the court refuses an application for a forfeiture order that would have covered the property;
…
It is s 45(3)(a)(i) that had the effect here of releasing the Canterbury property, the Mercedes, and the Ashwood property from the s 19 restraining orders without the s 31 exclusion applications having been heard or determined.
By virtue of s 59, the Commissioner — being a ‘proceeds of crime authority’ — may apply for a forfeiture order. Where property is suspected of being the proceeds of crime, s 49 spells out the circumstances in which a forfeiture order may be made. It provides:[26]
[26]Emphasis added.
49 Forfeiture orders — property suspected of being proceeds of indictable offences etc
(1) A court with proceeds jurisdiction must make an order that property specified in the order is forfeited to the Commonwealth if:
(a)the responsible authority for a restraining order under section 19 that covers the property applies for an order under this subsection; and
(b)the restraining order has been in force for at least 6 months; and
(c) the court is satisfied that one or more of the following applies:
(i) the property is proceeds of one or more indictable offences;
(ii) the property is proceeds of one or more foreign indictable offences;
(iii)the property is proceeds of one or more indictable offences of Commonwealth concern;
(iv) the property is an instrument of one or more serious offences;
(e)the court is satisfied that the authority has taken reasonable steps to identify and notify persons with an interest in the property.
(2)A finding of the court for the purposes of paragraph (1)(c):
(a)need not be based on a finding that a particular person committed any offence; and
(b)need not be based on a finding as to the commission of a particular offence, and can be based on a finding that some offence or other of a kind referred to in paragraph (1)(c) was committed.
(3)Paragraph (1)(c) does not apply if the court is satisfied that:
(a)no application has been made under Division 3 of Part 2-1 for the property to be excluded from the restraining order; or
(b) any such application that has been made has been withdrawn.
Refusal to make a forfeiture order
(4)Despite subsection (1), the court may refuse to make an order under that subsection relating to property that the court is satisfied:
(a)is an instrument of a serious offence other than a terrorism offence; and
(b) is not proceeds of an offence;
if the court is satisfied that it is not in the public interest to make the order.
Section 49(1)(c) requires a court to make an order that property be forfeited if the court is satisfied that property is the proceeds of an indictable offence. The practical effect of sub–s (3) of s 49 is, however, that the court does not need to be satisfied that the relevant property is the proceeds of an indictable offence if satisfied that no application has been made for the exclusion of property.[27] In particular, if no application has been made for an order under s 29 to exclude an interest in property from the operation of a s 19 restraining order, the Commissioner is relieved of the obligation of satisfying the court that relevant property is the proceeds of an indictable offence.
[27]That is, no exclusion under div 3 of pt 2–1, div 3 embracing ss 29 to 32 of the Act.
As is discussed below, there was argument before the judge with respect to the effect of s 49(3).
In circumstances where a forfeiture order has been applied for but not yet made, s 74(1) of the Act permits a person who claims an interest in property to apply for an exclusion order. Section 73 governs the making of those exclusion orders. Sections 73 and 74 provide:
73 Making exclusion orders
(1) A court that made a forfeiture order, or that is hearing, or is to hear, an application (a forfeiture application) for a forfeiture order, must make an order excluding a specified interest in property from forfeiture (an exclusion order) if:
(a) a person applies for the exclusion order; and
(b) the forfeiture order, or the forfeiture application, specifies property in which the applicant has an interest; and
(c) if the forfeiture order was (or the forfeiture order applied for would be) made under section 47 or 49—the court is satisfied that the applicant’s interest in the property is neither of the following:
(i) proceeds of unlawful activity;
(ii) if an offence on which the order was (or would be) based is a serious offence—an instrument of any serious offence; and
(d) if the forfeiture order was (or the forfeiture order applied for would be) made under section 48—the court is satisfied that the applicant’s interest in the property is neither proceeds nor an instrument of any of the offences to which the forfeiture order or forfeiture application relates.
(2) An exclusion order must:
(a) specify the nature, extent and value (at the time of making the order) of the interest concerned; and
(b) direct that the interest be excluded from the operation of the relevant forfeiture order; and
(c) if the interest has vested (in law or equity) in the Commonwealth under this Part and is yet to be disposed of—direct the Commonwealth to transfer the interest to the applicant; and
(d) if the interest has vested (in law or equity) in the Commonwealth under this Part and has been disposed of—direct the Commonwealth to pay the applicant an amount equal to the value specified under paragraph (a).
74 Applying for exclusion orders
Before a forfeiture order has been made
(1) A person may apply for an exclusion order if a forfeiture order that could specify property in which the person claims an interest has been applied for, but is yet to be made.
After a forfeiture order has been made
(2) A person who claims an interest in property specified in a forfeiture order may, at any time after the forfeiture order is made, apply to the court that made the forfeiture order for an exclusion order.
(3) However, unless the court gives leave, the person cannot apply for an exclusion order if he or she:
(a) was notified of the application for the forfeiture order, but did not appear at the hearing of that application; or
(b) appeared at the hearing of that application.
(4)The court may give the person leave to apply if the court is satisfied that:
(a) if paragraph (3)(a) applies—the person had a good reason for not appearing; or
(b) if paragraph (3)(b) applies—the person now has evidence relevant to the person’s application that was not available to the person at the time of the hearing; or
(c) in either case—there are other special grounds for granting the leave.
In particular, under s 73(1) the court that ‘is hearing, or is to hear’ an application for forfeiture must make an order excluding a specified interest in property, if satisfied that a person’s interest is neither the proceeds of unlawful activity, nor an instrument of any serious offence.
Section 66 of the Act provides that forfeited property vests in the Commonwealth:
66 What property is forfeited and when—general rule
Property specified in a forfeiture order vests absolutely in the Commonwealth at the time the order is made.
The Act also makes provision for automatic forfeiture upon conviction in some circumstances. Section 92 allows for the automatic forfeiture of property restrained by either s 17 or s 18 where the person is convicted of a serious offence. Section 17 authorises the making of restraining orders over property of people convicted of or charged with indictable offences and s 18 authorises the making of restraining orders over the property of people suspected of committing serious offences.
Section 92 provides:
92 Forfeiting restrained property without a forfeiture order if a person has been convicted of a serious offence
(1) Property is forfeited to the Commonwealth at the end of the period applying under subsection (3) if:
(a) a person is convicted of a serious offence; and
(b) either:
(i) at the end of that period, the property is covered by a restraining order under section 17 or 18 against the person that relates to the offence; or
(ii) the property was covered by such a restraining order against the person, but the order was revoked under section 44 or the property was excluded from the order under that section; and
(c)the property is not subject to an order under section 94 excluding the property from forfeiture under this Part.
(2) It does not matter whether:
(a) the restraining order was made before or after the person’s conviction of the serious offence; or
(b) immediately before forfeiture, the property is the person’s property or another person’s property.
(3) The period at the end of which the property is forfeited is:
(a) the 6 month period starting on the conviction day; or
(b)if an extension order is in force at the end of that period—the extended period relating to that extension order.
(4)This section does not apply if the person is taken to have been convicted of the offence because the person absconded in connection with the offence.
(5) A restraining order in relation to a related offence with which the person has been charged, or is proposed to be charged, is taken, for the purposes of this section, to be a restraining order in relation to the offence of which the person was convicted.
(6) If:
(a) under section 44, a restraining order that covered particular property is revoked, or particular property is excluded from a restraining order; and
(b) the security referred to in paragraph 44(1)(e), or the undertaking referred to in paragraph 44(2)(e), in connection with the revocation or exclusion is still in force;
the property is taken, for the purposes of this section, to be covered by the restraining order.
Property restrained under s 19 (as here) cannot be the subject of automatic forfeiture under s 92. Proof under s 49(1)(c) is required, unless s 49(3) applies.[28]
[28]See [41]–[42] above.
Section 317 makes clear that, in any application, the onus of proof lies on the party making the application:
317 Onus and standard of proof
(1) The applicant in any proceedings under this Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for.
At the time that the applications were before the primary judge, s 315A of the Act permitted a judge, in his or her discretion, to hear and determine multiple applications at the same time:
315A Court may hear multiple applications at same time
A court may hear and determine 2 or more applications under this Act at the same time.
Subsequently, the Crimes Legislation Amendment (Proceeds of Crime and Other Measures) Act 2016 (Cth), amended s 315A by adding sub–s (2), which provides:
(2)However, if:
(a) a proceeds of crime authority applies for a forfeiture order relating to particular property; and
(b) a person applies for an order (the exclusion order) under section 29 or 29A to exclude a specified interest in that property from a restraining order; and
(c) the application for the exclusion order has not been withdrawn;
the court may only hear the application for the forfeiture order after the application for the exclusion order has been determined.
The effect of s 315A(2) is to prescribe that an application under s 29 for exclusion from a restraining order must be heard before a forfeiture application is heard and determined. Section 315A(2) thus mandates the reverse of the sequence adopted by the judge here. It follows that Ruling No 1 will have no effect prospectively on applications made after s 315A came into operation.[29] Nevertheless, Ruling No 1 governed this proceeding and could potentially have an effect on applications in other proceedings that were made before s 315A came into operation.[30]
[29]1 March 2016.
[30]This Court was informed that there are multiple other proceedings awaiting hearing that could be affected by Ruling No 1.
Ultimately, the Commissioner, on the appeal, eschewed any reliance upon s 315A(2) in the construction of the Act as it was at the time of Ruling No 1.[31]
[31]See Grain Elevators Board (Vic) v Dunmunkle Corporation (1946) 73 CLR 70 with respect to the use of subsequent amendments in the construction of legislation.
The judge’s reasons (Ruling No 1)
The judge observed that ‘the primary function of restraining orders is to preserve the status quo of property until such time as the issue of whether it is forfeit to the Commonwealth can be determined’.[32]
[32]Ruling No 1 (2015) 298 FLR 128, 130 [14].
The judge noted the submissions by counsel for the Commissioner that all the evidence in respect of the exclusion and forfeiture applications should be considered together but the applications for exclusion from the restraining orders should be heard and determined first. The judge set out six reasons given by counsel for the Commissioner for this preferred sequence:
(a) The status of the restrained property should be ascertained as a foundation matter because forfeiture only applies to restrained property.
(b) The court ought not ‘pick and choose’ which disputes to consider. It ought deal with all controversies. [Counsel for the Commissioner] likened it to inviting a court in a negligence action to determine causation before breach of duty.
(c) If the court decided that the forfeiture application were successful (in the event of it being heard first) then the respondents would press their exclusion applications. If I were to decide that on the basis of evidence called on the exclusion application that the property was not ‘tainted’ at all then the finding would be inconsistent with my earlier decision to allow the forfeiture application. This was said to be an ‘illogical loop’.
(d) The proof required of the Commissioner may vary on the forfeiture application depending upon whether s 49(3) can be relied upon to relieve the Commissioner of compliance with s 49(1)(c). Thus the existence and status of the exclusion from restraining order application would need to be determined first.
(e) This case raises a separate issue in the restraining order exclusion applications as compared to the forfeiture order. This was said to arise because there was a dispute as to whether Ying (Mr Zhang’s wife) had a genuine interest in any of the property. This was said to be a distinguishing factor to Courtenay[[33]] in which the exclusion and forfeiture applications raised identical issues.
(f) Good public policy requires that any decision be made in line with the apparent intention of the legislature.[34]
[33]Commissioner of the Australian Federal Police v Courtenay Investments Ltd [No 4] [2015] WASC 101.
[34]Ruling No 1 (2015) 298 FLR 128, 132–3 [23].
The reference to s 49(3) in the Commissioner’s submissions raised the question of whether it was arguable that what the Commissioner needs to prove in a s 49 forfeiture application will vary depending on the existence and status of any exclusion applications: if applications for exclusion from restraining orders were heard first and determined to be unsuccessful, could s 49(3) operate to relieve the Commissioner of the burden of satisfying s 49(1)(c)? At the oral hearing before the judge, counsel for the Commissioner clarified that the Commissioner was not seeking to have the case heard on a s 49(3) basis; rather, the Commissioner contended, if the evidence in all the applications was heard together and the exclusion applications failed, then, on the basis that s 49(3) could be construed to apply where there was no exclusion application on foot (for example, where all the exclusion applications had been dismissed), the Commissioner might be assisted ‘in the future’ by s 49(3).
The construction and effect of s 49(3) was considered (but not decided) by Edelman J in Commissioner of the Australian Federal Police v Courtenay Investments Ltd [No 4],[35] who ‘hypothesised in the absence of any considered submissions’[36] that it could be argued that the words in s 49(3)(a), ‘no application has been made’, could be construed to mean ‘no extant application has been made’ for the property to be excluded from the restraining order.[37] In other words, s 49(3) would apply to relieve the Commissioner of proving that the property restrained was the proceeds of an indictable offence or an instrument of a serious offence providing there was no live exclusion application before the court, for example, where a s 31 exclusion application had been dismissed.
[35][2015] WASC 101 (‘Courtenay’).
[36]Ruling No 1 (2015) 298 FLR 128, 134 [29].
[37]Courtenay [2015] WASC 101 [118].
The judge below disagreed with this interpretation. He considered that the insertion of the word ‘extant’ would dramatically alter the meaning of s 49(3) in circumstances where the language of the provision is unequivocal. Moreover, the insertion of ‘extant’ would limit the application of s 49(3) from circumstances in the past and the present, to only the present. He said:
‘No application has been made …’ is, in my view, clear and unambiguous. If an application has been made for exclusion then the Commissioner must prove his case. ‘Has been made’ is an example of the use of present perfect tense in the third person singular. The present perfect tense speaks of the past and the present. The insertion of the word ‘extant’ changes the meaning to speak only of the present. If the Act intended to say that s 49(1)(c) did not apply if there were no current exclusion application on foot then, in my view, it would have said precisely that.[38]
[38]Ruling No 1 (2015) 298 FLR 128, 134 [30].
The judge drew a distinction between situations where (a) restrained property is automatically forfeited, unless excluded, when a person is convicted either following a guilty plea or a jury finding of guilt, and (b) where the Commissioner seeks forfeiture without relying on a conviction but where the court is satisfied that the property is ‘tainted’, as required by s 49(1)(c). He observed that the insertion of the word ‘extant’ would essentially circumvent the proof requirements of s 49(1)(c), and lead to the likely forfeiture of properties on the basis of a mere s 19(1) suspicion, which cannot have been Parliament’s intention.[39]
[39]Ibid 134–5 [31].
On the appeal, the Commissioner does not seek to challenge the judge’s rejection of the construction of s 49(3) whereby the Commissioner would be relieved, in a s 59 forfeiture application, of the burden of proving that property is the proceeds of an indictable offence, or an instrument of a serious offence, if an exclusion application has been made but dismissed. It is no longer in contest that where an exclusion application has been made, but is dismissed, the Commissioner is nevertheless required to prove that the property he seeks to forfeit is the proceeds of an indictable offence, or an instrument of a serious offence, in accordance with s 49(1)(c).[40]
[40]See also Commissioner of Australian Federal Police v Dong Hua International Investments Pty Ltd [2016] VSCA 15 [39] (‘Dong Hua’) where the Court (Redlich, Priest and Beach JJA) criticised an interpretation of the Act whereby if a s 31 exclusion application was dismissed, the exclusion order would have been properly considered to have ‘been withdrawn’ pursuant to s 49(3) and the Commissioner would not have to establish the matters set out in s 49(1)(c). The Court observed: ‘The meaning which the Commissioner seeks to attribute to s 49(3), is not the literal meaning of the text and is hardly so obvious a meaning as to justify the Commissioner conducting applications on the basis that no other view could be taken as to its meaning‘: [40]. The Commissioner indicated on the appeal here that it accepted these criticisms made in DongHua.
In the judge’s view, the Commissioner would not experience any disadvantage if the forfeiture applications were heard and determined first and then, if necessary, the exclusion applications dealt with, because, having rejected the construction of s 49(3) considered in Courtenay, the Commissioner would need to satisfy s 49(1)(c) ‘regardless of which application is determined first.’[41] The judge considered that having the forfeiture applications dealt with first would also be consistent with Zhao. As noted, the judge’s application of Zhao is challenged in the appeal.
[41]Ruling No 1 (2015) 298 FLR 128, 135 [36].
In Zhao the High Court held that a person seeking an exclusion order from forfeiture under s 73 of the Act ‘will effectively be compelled to put on some evidence, at least where the Commissioner’s evidence is sufficient for the making of the order sought.’[42] The Court also said:
In aid of his argument that the … Act may be taken to require that forfeiture proceedings continue regardless of whether criminal proceedings are pending, the Commissioner points to the position in which a person is inevitably put when an application for forfeiture is brought under s 47 or s 49. At least where the Commissioner has satisfied the evidentiary requirements of those provisions, so that the court could be satisfied that a serious offence of some kind has been committed or that the property in question is the proceeds or an instrument of crime, a person with an interest in the property will be faced with the choice of whether to defend the proceedings. This will invariably require that they provide evidence to counter that put forward by the Commissioner. In a sense, then, the … Act puts the person to their election. So much may be accepted …[43]
[42]Zhao (2015) 255 CLR 46, 57 [29].
[43]Ibid 58–9 [37].
Although Zhao was concerned with whether applications for forfeiture and exclusion from forfeiture should be stayed until the conclusion of a related criminal trial, the judge was of the view that the observations of the High Court on the operation of s 49 and its relationship to s 73 were equally applicable to the situation where the application was for an exclusion order to be made under s 29: in both cases the onus is on the applicant for an exclusion order to prove that the property is not ‘tainted’. In referring to the passage extracted immediately above from Zhao, he said:
Whilst these statements were made in the context of an appeal concerning whether to stay forfeiture/exclusion proceedings until the conclusion of a related criminal trial, the operation of s 49 and its relationship to s 73 were spelt out. Where the Commissioner’s evidence is sufficient for the making of a forfeiture order a respondent who is also an applicant for an exclusion order under s 73 will have some hard decisions to make. To have any prospect of success he or she must put on evidence. Where the Commissioner’s evidence is insufficient for the making of a forfeiture order, there will be no need for an applicant in resisting the application for forfeiture or in prosecuting the s 73 exclusion application to put on any evidence. The forfeiture order application will fail and the restrained property will be released. These observations by the full High Court were made in relation to a s 73 application for exclusion from a forfeiture order. I can see no sound reason why they ought not also apply to an application for exclusion from a restraining order under s 29. In both cases the onus is on the applicant to prove that the property is not ‘tainted’ — in s 29(2)(d) by specified criminal activity; in s 73(1)(c)(i) by being the proceeds of unlawful activity; or in both sections by the property being an instrument of any serious offence (s 29(2)(d)(ii); s 73(1)(c)(ii)).[44]
[44]Ruling No 1 (2015) 298 FLR 128, 136 [38].
The judge ultimately arrived at his conclusion to hear and determine the forfeiture application first based upon considerations of fairness. In a passage which the Commissioner criticised on the appeal, the judge expressed the view that in any interference by the state with private property rights, it is incumbent on the state to provide some evidence to support that interference before the proprietor is required to respond. He said:
I also consider that to require the Commissioner to present his case on forfeiture at the outset is procedurally fair. The Commissioner has at his disposal an Act which in certain circumstances can operate to forfeit property automatically. The Commissioner cannot rely on those sections because neither applicant for exclusion has been charged with or convicted of any criminal offence. Zhang is the registered proprietor of two houses and the Mercedes. The Commissioner wants them to be forfeited to the Commonwealth. In my view, fundamental notions of fairness dictate that where the state seeks to seize property, the state or its agent ought provide some evidentiary basis for that extraordinary interference with proprietary rights before the proprietor ought be called upon to answer anything at all.[45]
[45]Ibid 136 [39].
The parties’ submissions
The Commissioner submitted that, upon its proper construction, the Act required the judge to determine the s 31 exclusion applications before determining the forfeiture applications. Moreover, the Commissioner submitted, the judge erred in his application of Zhao and was wrong to allow notions of fairness to intrude upon the construction of the Act.
Zhang and Shen submit that the question of the sequence in which the exclusion applications and the forfeiture applications should be heard was an interlocutory discretionary decision on a matter of practice and procedure. Consistently with authorities such as House v The King,[46] in Re The Will of Gilbert (dec)[47] and Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc,[48] they submit that the Commissioner’s task, in seeking to persuade this Court to overturn the trial judge’s decision, is a difficult one. Specifically, they contend that it was open to the judge to determine, by reference to case management principles and questions of fairness as discussed by his Honour, the order in which the various applications before him were to be heard and determined. Another judge, given different circumstances, might exercise his or her discretion differently.
[46](1936) 55 CLR 499.
[47](1946) 46 SR (NSW) 318.
[48](1981) 148 CLR 170.
Zhang and Shen contend that, because the judge’s decision about the order of the applications is an interlocutory decision, the Commissioner has to establish that there would be substantial injustice if the decision were left unreversed. They argue that the Commissioner is unable to establish any such injustice because (so it is submitted) ‘the result would have been the same in any event’. Despite the Commissioner being put on notice by their written submissions that they would apply at trial to have the forfeiture applications heard first, before the hearing of their s 31 (and s 74) exclusion applications, he did not file sufficient evidence to make out his case. His decision not to seek to file further evidence, and instead to proceed with the forfeiture applications on the evidence he had, was a forensic one which he is now seeking to avoid. They submit that even if the s 31 exclusion applications had been heard together with the forfeiture applications, the Commissioner would have gone first and then been ‘no cased’ in exactly the same way as he was at the conclusion of the hearing of the forfeiture applications. Additionally, they submit that, notwithstanding Ruling No 1, it was open to the Commissioner to call them as witnesses in the forfeiture applications and to seek leave to cross-examine them pursuant to s 38 of the Evidence Act 2008 as unfavourable witnesses. In such circumstances, it is argued that Ruling No 1 did not deprive the Commissioner of the ability to put before the Court any evidence that he might otherwise have been able to rely upon from cross-examining Zhang and Shen as witnesses in the s 31 exclusion applications.
In response, the Commissioner submits, in accordance with his primary position, that if the applications had been heard together (as permitted by s 315A of the Act as it then stood), it would have been necessary for Zhang and Shen to have gone first in respect of the s 31 exclusion applications; alternatively, the s 31 exclusion applications could have been heard and determined (or withdrawn) before the determination of the forfeiture applications.
As to the possibility of the Commissioner calling Zhang and Shen as the Commissioner’s witnesses in the forfeiture applications and then making application to cross-examine them as unfavourable witnesses pursuant to s 38 of the Evidence Act 2008, the Commissioner submits that such a course was not open and would have involved contravening the judge’s reasoning in Ruling No 1.
Did the judge misconstrue the Act?
In our opinion, the orders dismissing the forfeiture applications are not interlocutory. They are final orders. The effect of the orders is that none of the Canterbury property, the Mercedes, or the Ashwood property is subject to any restraining order under the Act. The restrained property is released. There are no further steps to be taken towards a final disposition of the proceeding at first instance.
We consider that Ruling No 1, and the consequential orders, were made in error. The sequence adopted by the judge was erroneous and the source of the error lay in the judge’s misconstruction of the Act. Upon its proper construction, the Act required the judge to determine the s 31 exclusion applications before determining the forfeiture applications. The error arose because the judge was persuaded that a beneficial reading of the Act which favoured Zhang and Shen should be preferred to a plain reading of the text of the Act.
In our view, Zhang and Shen, in submitting that there was nothing impermissible about the sequence adopted by the judge because, if necessary, the exclusion applications (or, more particularly, the s 31 exclusion applications) could be heard after the making of any forfeiture orders and the result ‘would have been the same’, have elided the difference between exclusion applications made pursuant to s 31 of the Act and exclusion applications made pursuant to s 74 of the Act. It is necessary in construing the Act to be mindful that exclusion applications made pursuant to s 31 of the Act are applications to exclude property (or an interest in property) from the operation of restraining orders; whereas exclusion applications made pursuant to s 74 of the Act are applications made to exclude property (or an interest in property) from the operation of forfeiture orders. The distinction between the effect of restraining orders and forfeiture orders is critical.
While restraining orders have the effect of restricting the exercise of rights of ownership over property in the interim, forfeiture orders exhibit a degree of finality. As noted, s 66 of the Act provides that property specified in a forfeiture order vests absolutely in the Commonwealth at the time the forfeiture order is made.[49] In other words, forfeiture orders effect a transfer of ownership in property.[50] While s 73 exclusion orders from forfeiture may be determined after a forfeiture order is made, this is because the Act makes express accommodation for directions, after the property has vested in the Commonwealth, for the Commonwealth to transfer the interest to the applicant, pursuant to s 73(2)(c),[51] or, if the property has been disposed of, for the Commonwealth to pay the applicant an amount equal to the value of the interest concerned, pursuant to s 73(2)(d).[52] There is no such accommodation made under the Act, post forfeiture, in respect of exclusion applications from restraining orders under s 29. This is so for the very reason that the Act envisages that exclusion applications from restraining orders will have been dealt with before forfeiture applications are heard and determined. In other words, if a forfeiture application is successful — and that possibility must always be open at the time a court embarks upon the hearing of the application — there will be no utility in persisting with an exclusion application from an earlier restraining order because the property will have vested in the Commonwealth and the Act makes no provision for reverse transfers in ownership or monetary compensation with respect to an order made under s 29 excluding property from restraining orders.
[49]See [46] above.
[50]However, by virtue of s 67(1)(a) of the Act, property that is ‘registerable property’ only vests in equity in the Commonwealth at the time the forfeiture order is made, and does not vest at law until there has been compliance with the relevant applicable registration requirements.
[51]See [44] above.
[52]Ibid.
Similarly, as was observed by the NSW Court of Appeal[53] in Studman v Director of Public Prosecutions (Cth),[54] once a forfeiture order has been made and the relevant property vests in the Commonwealth, any appeal against the rejection of an application to exclude property (or an interest in that property) from the operation of the restraining order is futile.[55]
[53]McClellan CJ at CL (with whom Spigelman CJ and Handley AJA agreed).
[54](2007) 177 A Crim R 34 (‘Studman’).
[55]Ibid 37 [13]–[17].
Once the judge in the present case heard and determined the forfeiture applications, there could never have been any occasion upon which he might subsequently hear and determine the s 31 exclusion applications. If the forfeiture applications were refused then that would have been the end (as it turned out to be) of the operation of the restraining orders. On the other hand, if the forfeiture applications were granted then that too would have been the end of the restraining orders. All that would have been left for the Court to do was to hear and determine the s 74 exclusion applications (being the applications to exclude the relevant property from the operation of the forfeiture orders). In effect, the judge, by adopting the sequence he did, never allowed for the possibility that he would deal with, and dispose of, the s 31 exclusion applications. It became inevitable that the s 31 exclusion applications would never be dealt with by the Court. In our view, this was contrary to the intended operation of the Act.
The making, and maintaining, of exclusion applications under s 31 of the Act has important consequences as set out in s 49(3) of the Act. It would serve no purpose to require a party to make a s 31 exclusion application (and have that application remain on foot during the hearing of a forfeiture application) merely so as to require the Commissioner to establish one of the matters set out in s 49(1)(c) of the Act. If the submissions of Zhang and Shen were to be accepted then, in order to ensure that s 49(1)(c) applies (and one of the four matters therein is required to be proved by the Commissioner), all a respondent to a forfeiture application would need to do would be to issue and maintain an exclusion application, made under s 31 of the Act, that would never ultimately have to be heard or determined. Put another way, if general considerations of ‘fairness’ require the Commissioner to ‘go first’, as the judge concluded, once a forfeiture application has been made, then a ‘protective’ exclusion application could be made under s 31 of the Act. Such an application would never be heard or determined: its only purpose would be to disengage s 49(3) of the Act. An applicant for exclusion under s 31 would thereby obtain a substantial benefit from the application without ever having to discharge the onus associated with it.
Nothing in the Act suggests that it was the intention of the Parliament that parties be permitted to make applications to a court that will never be heard or ruled upon. One would be very slow to embrace a construction of any Act of Parliament that required or permitted parties to make applications to courts, and thereby to consume valuable public resources in pursuing such applications, in circumstances where general notions of fairness or case management principles would ultimately require orders to be made that would have the effect of those applications never being heard and determined on their merits.
This is not to suggest that Zhang and Shen made their s 31 exclusion applications solely in order to disengage s 49(3). As mentioned, there was no challenge to the bona fides of their s 31 exclusion applications and there was a considerable quantity of evidence filed in support.[56] The point is rather that the sequence proffered by Zhang and Shen had as an inevitable consequence that their s 31 exclusion applications would never be dealt with. The construction of the Act upon which that sequence depends would allow other persons whose property is restrained, and against whom a forfeiture application is made, to make exclusion applications under s 31 purely for the purpose of having those applications on foot and thereby obstruct any reliance on s 49(3). We consider that a construction which allows for that obstruction to occur is incompatible with the intended harmonious operation of the Act.[57]
[56]Compare Commissioner of the Australian Federal Police v Vo (2015) 302 FLR 209, 217 [40] (where Ms Vo made admissions that she could not meet the onus imposed on her).
[57]Independent Commission Against Corruption v Cunneen (2015) 318 ALR 391.
In our view, the judge was led into error by the submissions of Zhang and Shen. The judge dealt with the issue of the sequence of the applications upon the basis that it was open to hear and determine the forfeiture applications before hearing and determining the s 31 exclusion applications. Properly construed, the Act does not permit exclusion applications made under s 31 of the Act to be heard after the hearing and determination of forfeiture applications.
Under the Act, Zhang and Shen were either required to pursue the s 31 exclusion applications before the forfeiture applications were determined, or to withdraw the s 31 exclusion applications. The Act does not allow for s 31 exclusion applications to be kept on foot, with the consequence that s 49(3) is deprived of any operation, without determination.
The judge’s error had the effect of permitting Zhang and Shen to require the Commissioner to prove one of the matters set out in s 49(1)(c) of the Act by simply maintaining on foot an application that would never be heard. In other words, Ruling No 1 deprived the Commissioner of an opportunity significantly to add to the evidentiary material upon which the forfeiture applications were to be heard. It is not to the point that the Commissioner might now be unable to say with any precision what change he could have made to the evidentiary foundations upon which he was entitled to have his forfeiture applications decided.[58] As is often the case in matters of this kind, the details of the sources from which particular property might have been acquired is always more likely to be in the hands of those who claim an interest in the property than a responsible authority (in this case, the Commissioner).[59]
[58]See Balenzuela v De Gail (1959) 101 CLR 226, and in particular, Dixon CJ at 236.
[59]See [91] below.
In our view, the question of the construction of s 49(3) may have served to distract the judge. Implicit in the judge’s reasoning is that he would not adopt an approach which would permit the Commissioner to be relieved of his obligation to prove that s 49(1)(c) was satisfied. The possibility that s 49(3) could be construed to have so relieved the Commissioner, unless an exclusion application remained live (or ‘extant’) in the proceedings, although a possibility that his Honour rejected, may have reinforced the judge’s determination to ensure that the Commissioner was put to his proof by requiring the Commissioner’s forfeiture applications to be heard first.
Finally, on the question of sequence, it is necessary to consider the logic underlying the Act. As forfeiture orders are made under s 49 over restrained property, the first step for the court must be to identify the scope of the restraining order. Where a s 31 exclusion application has been made this requires the court to identify what property remains within the scope of the restraining order after the s 31 exclusion application has been heard and determined. It is that remaining scope which identifies the property to be forfeited. It follows that an exclusion application must be determined before the court considers whether the property should be forfeited pursuant to s 49(1)(c).
Did the judge misapply Zhao?
Zhang and Shen submit that the observations of the High Court in Zhao are relevant because there the High Court made clear that the Commissioner bore the onus of proof in obtaining a forfeiture order, and that the two respondents in that case would only need to give evidence once the Commissioner’s evidence was deemed sufficient.
In Zhao the High Court affirmed an order of this Court[60] granting a stay of forfeiture proceedings until the completion of criminal proceedings on the ground that, in the circumstances, there would be a real risk of prejudice to the accused’s defence in the criminal proceedings if the accused was obliged to give evidence in the forfeiture proceedings before the criminal proceedings were concluded. The High Court held that the risk of prejudice was plain if a stay of the forfeiture proceedings was not granted because the offences and the circumstances relevant to
both offences were substantially identical.[61]
[60]Zhao v Commissioner of the Australian Federal Police (2014) 43 VR 187.
[61]Zhao (2015) 255 CLR 46, 59 [42]. See Crimes Legislation Amendment (Proceeds of Crime and Other Measures) Act 2016 (Cth), which substitutes a new s 319 into the Act providing in s 319(2)(c) that the ‘court must not stay … proceedings [under the Act] … on the ground that … a person may consider it necessary to give evidence … and … the evidence is or may be relevant … to a matter that is, or may be, at issue in criminal proceedings that have been, are proposed to be or may be instituted or commenced … against the person or any other person’.
The risk of prejudice identified in Zhao related to the abrogation of the privilege against self-incrimination and the loss of the right to silence in the criminal trial if the forfeiture proceeding were permitted to proceed. The present case is distinguishable because, unlike Zhao, no criminal proceedings have been commenced, no application for a stay has been brought, and the proceedings are all civil proceedings. As the plurality said in R v Independent Broad-based Anti-corruption Commissioner,[62] principles of law that protect accused persons cannot be readily extended to those who have not been charged and for whom there is no prosecution pending.[63] The Court there held that the ‘companion principle’ to the principle of the common law that the onus of proof of a criminal charge rests upon the prosecution, namely, that an accused person cannot be required to testify to the commission of the offence charged, did not apply to a person who had not been charged with an offence, nor to a person reasonably suspected of having committed an offence.[64]
[62](2016) 329 ALR 195 (‘R v IBAC’).
[63]Ibid 205 [48]. There the High Court unanimously determined that an investigation could be conducted under pt 6 of the Independent Broad-based Anti-corruption Commission Act 2011 in relation to persons who have not been, but might subsequently be, charged and put on trial for an offence relating to the subject matter of the examination.
[64]Ibid 204 [42], 205 [48]-[51]. See Commissioner of the Australian Federal Police v McGlone [2016] NSWCA 103, [122]–[137] (Beazley P, with whom Ward and Gleeson JJA agreed).
We consider that the Commissioner is correct in contending that the judge erred in his application of Zhao. Zhao has no application to the nature or circumstances of this case.
General questions of fairness do not arise here in the context of an Act the intention of which is to interfere with private property rights and which creates a complex and prescriptive legislative scheme.[65] As the New South Wales Court of Appeal said in Lee v Director of Public Prosecutions (Cth),[66] in speaking of the Act:
[T]he confiscation of property is not achieved by words of general implication, nor is it an intrusion on general law protections which has come about incidentally to the main purpose of the legislation … The taking of the property in the prescribed circumstance is the primary purpose of the legislation: Proceeds of Crime Act (Cth), s 5. The interests of a person in property the subject of a valid restraining order are deliberately and expressly at risk of confiscation, absent affirmative steps to exclude property on the application of the interested person. There is thus a clear and manifest intention to interfere with property rights.[67]
[65]See Commissioner of the Australian Federal Police v Lee [2016] NSWSC 915 [20]–21].
[66](2009) 75 NSWLR 581.
[67]Ibid 587 [21] (citations omitted) (emphasis added).
In this regard, what was said by Gageler J in R v IBAC[68] is, as the Commissioner contended, apposite. In the context of considering the abrogation of the privilege against self-incrimination under the Independent Broad-based Anti-corruption Commission Act 2011 Gageler J said:
Legislation is sometimes harsh. It is rarely incoherent. It should not be reduced to incoherence by judicial construction. An interpretative technique which involves examining a complex and prescriptive legislative scheme designed to comply with identified substantive human rights norms in order to determine whether, and if so to what extent, that legislative scheme might butt up against a free-standing common law principle is inherently problematic. The technique is even more problematic if the common law principle lacks precise definition yet demands legislative perspicacity and acuity if it is not to create of its own force an exception to the scheme that is spelt out in the statutory language.
Be that as it may, any common law principle or presumption of interpretation must surely have reached the limit of its operation where its application to read down legislation plain on its face would frustrate an object of that legislation or render means by which the legislation sets out to achieve that object inoperative or nonsensical.[69]
[68](2016) 329 ALR 195.
[69]Ibid 211–12 [76]–[77] (citations omitted).
Furthermore, we consider that substantial injustice was occasioned to the Commissioner when Zhang and Shen were permitted to leave on foot the s 31 exclusion applications in circumstances where those applications could serve no purpose other than to deprive s 49(3) of the Act of operation, in the context of the hearing of the forfeiture applications. A consequence of the judge’s erroneous ruling as to the sequence in which the applications could be heard and determined was that the Commissioner was required to attempt to prove a matter that he would not have been required to prove had there been no s 31 exclusion application made. If, on the other hand, the s 31 exclusion applications had been required to be heard and determined first in time (and if Zhang and Shen had pursued their s 31 exclusion applications, as was to be expected) the Commissioner would have had the ability to cross-examine them upon the affidavits mentioned above[70] that they had filed and served in accordance with court orders. There would have been no general question of fairness that would have prevented any cross-examination. Accordingly, even if the orders made were interlocutory (which we have rejected),[71] we consider that the Commissioner has established that, if not reversed, a substantial injustice would occur.
[70]See [15] above.
[71]See [71] above.
Further, we consider that the submission that, after the judge delivered Ruling No 1, the Commissioner could have called Zhang and Shen on the forfeiture applications and sought leave to cross-examine them, overlooks the text and tenor of the judge’s reasons that, in his view, fairness dictated that the Commissioner went first with his evidence before Zhang and Shen were required to put on their cases.
Conclusion
Given the errors in Ruling No 1, the order dismissing the forfeiture applications cannot be permitted to stand.
We would grant the Commissioner leave to appeal, allow the appeal, set aside the orders made by the judge consequential upon Ruling No 1, Ruling No 2 and Ruling No 3 and remit all of the applications made by the parties to the Trial Division to be reheard and determined.
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